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Synthesis/Regeneration 6   (Spring 1993)

Why We Run for the Border

by Lisa Adler, Raritan-Brunswick Greens

From colonialism, to neo-colonialism, to "free trade zones" around the world, the relationship between the north and the south has been one of exploitation. Many development economists have pointed out that contrary to popular assumptions, net wealth has flown from the south to the north.

Export Crops

A defining economic relationship between the US and Latin America has been the imposition and maintenance of cash crops for export. Export crops have a profound effect on the ecology and social relationships in the region. El Salvador provides a good example. Much of the civil and economic strife which surrounds this tiny country can be traced back to fundamental changes in land relationships which resulted from the development of cash crops. When the Spanish arrived, they transformed the communal land arrangements into semi-feudal haciendas. However, subsistence farming wasn't displaced until the development of indigo in the 18th and 19th centuries. Indigo was replaced by the better known commodity, coffee, which preceded cotton, and finally cattle. It was not until the development of the export sector that subsistence farming changed from being the production system of the society to being the subordinate sector of the economy.

As ever-expanding plantations claimed the best arable land, subsistence farmers were turned into dispossessed, migratory, semi-proletarians. This forced dislocation has obvious social implications—people have an increasingly difficult time feeding their families. But, there is also an important ecological factor. As peasants attempt to supplement their meager wages, they are forced to farm the least fertile lands. These lands are the most susceptible to degradation from over-exploitation by any kind of farming. In addition, subsistence farmers pushing into the forset to find fertile land have always been the most severe deforesting agent in the country. El Salvador has lost nearly 95% of its original deciduous forests. Today less than 7% of the country remains forested in anyway.

These economic arrangements create a further environmental and social problem: population increase. As subsistence farmers are pushed by commercial agriculture onto ever more marginal land, children become the only resource available to increase productivity. Since 1900, the population of El Salvador has increased four and a half times. Such population increase only heightens the demand on the marginal land of the subsistence sector, causing further degradation, exacerbating the the cycle of environmental demise.

From cash crops to debt servicing to free trade, the end result always seems similar: the rich get richer and the poor get poorer.

Of course, the plantations themselves are a major source of economic misery and ecological impoverishment. The ill-effects of mono-cropping are only somewhat held at bay by massive doses of petrochemicals—which have their own negative impacts.

When plantations are owned by the local landowning class, the benefits for the north are often indirect. For example, access to cheap commodities produced south of the border has been part of the "bargain" between capital and labor in this country to ensure a certain standard of living for the working class. Capital investment and "aid" to the south is offset by guarantees to buy petrochemicals produced in the north. When such policies and social arrangements lead to violence, the US can export what it produces best—weapons. For example, the 1954 bombing of Guatemala by US planes overthrew the democratically elected Arbenz government after he threatened the private fiefdom of the United Fruit Company by, among other things, proposing that it pay taxes.

Debt Serving

A second important factor in north-south relations concerns debt. In the seventies, international banks were fighting over who could make loans to Third World countries. This situation resulted from the glut in "petro-dollars"— revenues from increased oil prices that were sitting in western banks. A new rise in oil prices in 1978-79 plus a drastic fall in commodity prices plus rising protectionism (ie, anti-free trade policies) in the industrialized countries caused economic crises for many developing nations. Interest rates soared in the eighties, partly due to massive military spending. The 1980s military spending joyride on credit contributed to the sudden rise in the deficit, which helped to push up interest rates to record highs for dollar-denominated debt. This resulted in a capital outflow from the south to the north. By 1986 the outflow was about $50 billion.

While Third World nations were calling for debt relief, the IMF came up with "structural adjustment" policies which emphasized incentives for export. This devaluing of the local currency caused massive inflation. At the same time they imposed an "austerity" program: reduced public spending, increased prices, and reduced subsidies. The IMF's main concern has been to ensure a stable monetary system for world trade, but who has gained from such trade historically? Export economies have been detrimental for most people in the Third World. The IMF overseeing Third World debt servicing is like the fox guarding the chicken coop. Free Trade Zones

A further development in exploitation by the north has been the creation of Export Processing Zones, or "Free Trade Zones." These areas have primarily sprung up in Southeast Asia, Latin America, and the Caribbean. These textile, food-processing, electronics, or automobile factories are wholy owned by foreign capital. The situation is very reminiscent of the "company towns" of the 19th century. Young women are bused in or housed in barracks. Working conditions are poor. Union activity is forbidden. Wages are low. Sweet deals are often made with the host government. Environmental regulations, when they exist, are primarily ignored. The result is massive profits for the corporations who manage to set up shop in the Zones.

From cash crops to debt servicing to free trade, the end result always seems similar: the rich get richer and the poor get poorer. This is not because the rich are inherently smarter, or better, or more evil. The outcomes from the north-south relationship are simply the regular workings of capital, the logical result of the international capitalist system.

North-South Relationships

I have found Immanuel Wallerstein's theories useful in making sense of current north-south relationships. Wallerstein shifts the unit of analysis from the nation state to the world system as a whole. He believes that looking at individual states cannot provide answers to broad questions of political economy, such as why some states are "rich" while others are "poor". Individual states are connected to each other in an economic world system, and only through an exposition of the structures of the world system can we hope to understand the global economy we find ourselves in today.

Wallerstein sees the economic world system as being similar to a domestic division of labor with the "core" countries (like "capitalists") extracting surplus from the "peripheral" countries (like "workers"). In our current world system, most of the countries in the north behave like "core" countries, while those in the south mostly behave like peripheral countries.

For Wallerstein, the defining characteristic of an economic "system" is the existence of a single division of labor. A single division of labor exists when any unit within the system cannot subsist without the system as a whole.

The single division of labor extracts surplus through the process of unequal exchange. This occurs in two ways. (1) Manufactured goods have more value added: if a country buys timber (or cotton) and makes the timber into a ship (or textiles) using technology and more labor, the timber embodied in the ship has become much more valuable than it was originally. As a result, the second country is better off, "richer." The richer country becomes more powerful and is then in a better position to force favorable (unequal) trade relations. (2) Historically, countries which primarily produce raw materials for export have been unable to develop strong economies. As a result, they are in worse bargaining positions for demanding favorable (or even fair) trade arrangements. This relationship simply perpetuates itself because the rich country is always in a better position.

Efforts to set up Free Trade Zones around the world can be seen as an attempt to streamline the single division of labor that already exists between the north and the south. It aims to reduce transaction costs so that profits can be even higher.

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